With three-year annualised returns of about 42 per cent, Quant Active Fund is among the top performers in the multi-cap category. We analyse if this fund is investment-worthy.
Multi-cap funds promise all flavours of equity investing at one place, at any point in time and in a reasonably high degree. These funds must invest at least 25 per cent of their assets each in large, mid and small caps. With three-year annualised returns of 41.75 per cent as on April 10, 2023, Quant Active Fund is the top performer in this category over the last three years. The fund’s assets have also been on the rise. From a meager Rs 10.50 crore in January 2020, the fund’s AUM has risen to Rs 3,555 crore in January 2023, thus multiplying by about 340 times. Let’s find out what’s helping this fund deliver blockbuster returns and whether you should consider investing in it.
About Quant Active Fund
Previously known as the Quant Growth Plan, the fund was rechristened in 2018 after SEBI’s reclassification exercise. From a diversified equity scheme with the NIFTY 50 as its benchmark, the fund became a multi-cap fund, with NIFTY 500 Multicap 50:25:25 TRI as its benchmark. The fund is managed by Ankit Pande and Vasav Sahgal. The former has been associated with this fund since May 2020 and the latter, since April 2022. Let’s look at the returns of this scheme.
How Are The Returns Of Quant Active Fund ?
Let’s take a look at the fund’s trailing returns in the chart below.
Returns as on March 31, 2023
As seen above, the fund has been a consistent outperformer across the long term time frames.
How about the annual returns? See the chart below. It shows the fund’s annual returns since its current fund manager, Ankit Pande, has been managing it. The fund has beaten the category three years in a row, that too by a wide margin.
But is the fund undertaking more risk to generate higher returns for its investors? For this we looked at the risk-adjusted returns of the fund, as measured by Jensen’s alpha, and compared them with the peers. A higher Jensen’s alpha is better for investors. For this fund, Jensen’s alpha stood at a whopping 9.03%, whereas the category average was only 0.39%. This implies that the fund has better risk-adjusted returns as compared to its peers.
But how is this fund generating such high returns? Let’s find out.
What’s Responsible for Its Outperformance?
The credit for the fund’s outperformance goes to its fund managers, especially Ankit Pande. Pande follows his convictions and doesn’t mind sailing against the wind. For instance, the top stocks held by the funds differ significantly from those of its multi-cap peers.
| Top 10 Equity Stocks-Holding (%) – Scheme Vs Category | ||
| Stocks | Quant Active Fund | Multi Cap Fund |
| HDFC Bank Ltd. | 9.03 | 3.52 |
| Reliance Industries Ltd. | 7.47 | 2.52 |
| State Bank Of India | 5.52 | 2.94 |
| ITC Ltd. | 5.4 | 1.47 |
| Tata Communications Ltd. | 3.32 | 0.35 |
| IRB Infrastructure Developers Ltd. | 3.31 | 0.18 |
| Larsen & Toubro Ltd. | 3.29 | 1.53 |
| Linde India Ltd. | 3.23 | 1.27 |
| Punjab National Bank | 3.16 | 0.2 |
| LTIMindtree Ltd. | 2.81 | 0.39 |
Data as of March 2023
All numbers in %
Another difference between Pande and his peers who favour a buy-and-hold approach is that Pande believes in taking opportunistic bets. The funds turnover ratio has been as high as 116%, which means the fund changes the entire portfolio in one year.
As far as the fund house’s investment ideology is concerned, Quant AMC’s funds follow the fund house’s proprietary VLRT framework. VLRT stands for valuation, liquidity, risk appetite and time. The VLRT framework appears to have played a significant role in the outperformance by the AMC’s funds.
We can look at the fund’s asset allocation strategy too to find out factors contributing towards the fund’s outperformance.
Fund’s Asset Allocation
The chart below shows how the fund’s asset allocation has changed over the years. It clearly shows that the fund had more allocation towards small-cap stocks in the quarters ended July 2020 and October 2020. Small-cap stocks rallied significantly during that period, which is likely responsible for the high returns by the fund in the past three years.
Similarly, if we look at the allocation in quarters ended January 2022 and January 2023, the allocation to large caps has gone up. Large caps gave better returns than mid and small caps during this period. This has likely contributed to the fund’s outperformance.
Data as of 31 March 2023
Is Quant Active Fund Good Enough to Invest In?
Like many other Quant funds, Quant Active Fund is also an outlier. Its offbeat investment style has made it a chart-topper. If you are interested in this fund, you can consider it. But given its limited history under the current fund managers, avoid going overboard on it. Also, be ready to tolerate higher volatility, given the mandatory 50% allocation to mid/small caps.
On a general note, also consider if you should invest in a multi-cap fund at all. Flexi-cap funds which also invest across companies of all sizes provide more flexibility to the fund manager. These funds also have much longer history and hence you can analyse the performance of specific funds across cycles.
If you have not yet started your mutual funds investments, you can start investing using ET Money. Here you can invest without paying any commission and track all your mutual fund investments at one place.
